Consumers hit by new wave of gasoline price woes

Motorists are spending well over $2 a liter on petrol in some parts of the country due to soaring oil prices and a weakening Australian dollar.

In some parts of the country, gasoline prices have surpassed last year’s highs after the conflict in Ukraine sent prices skyrocketing.

Average prices in Sydney have reached $2.20 per liter for unleaded petrol, Compare the Market data shows – a whisper above the $2.18 per liter average reached during the peak last year.

Volatility in global oil markets is supporting rising petrol and diesel prices in Australia, with Brent oil futures surging above $93 a barrel late last week.

This is the highest level reached by the main oil benchmark since November 2022.

Commonwealth Bank commodities expert Vivek Dhar said supply cuts by major oil producers were keeping upward pressure on prices, with the latest data showing global stocks were already starting to fall sharply .

He said Saudi Arabia and Russia had extended their supply and export cuts until the end of the year, despite hopes they would ease them in October.

Mr Dhar said oil prices above $100 a barrel were not unthinkable in the second half of 2023 under these conditions, but stocks would need to fall as quickly in September as in August for that to happen.

He said high refining margins and a weak Australian dollar were also fueling the higher cost of petrol and diesel in Australia.

“A weaker Australian dollar appears a threat in the coming months if Chinese economic data surprises on the downside and iron ore prices decline significantly,” the analyst wrote in a note.

Rising fuel prices could also make it harder for the Reserve Bank to bring inflation back to its target range of 2 to 3 percent.

AMP economist Shane Oliver said fuel prices would amount to a direct increase in inflation figures and would likely worry Australia’s central bank.

But he added that it was unlikely to trigger another interest rate hike on its own.

Dr Oliver said the latest rise in fuel prices was hitting the economy at a very different time to when the conflict in Ukraine triggered a sharp rise last year.

He said last year’s price rise came from a much lower level and was accompanied by a supply deficit and growing demand for just about everything.

“This time it’s a bit different, the magnitude of the increase is not as pronounced and everything else is not increasing as well,” he told AAP.

Combined with a weakened consumer sector, high fuel prices could act as a “spending tax” and help weigh on economic activity.

As households tighten their belts, Dr Oliver said retailers may not be able to pass on increased transport as easily as last year.

He also said an extra $10 a week in fuel costs would represent a further blow to household budgets at a time when mortgage holders were already suffering painful increases in their repayments.